Do you ever wonder why you are paying so much for your vehicle – and someone else with the exact same vehicle pays so little? Assuming other key factors aren’t contributing factors, it could be due to your insurance score.
What is an Insurance Score?
An insurance score is a number or rating that predicts how likely an individual is to file an insurance claim in the future. Insurance companies use this information to underwrite and price policies, and to assign policyholders to risk pools. The more likely a person is to file a claim, the lower their insurance score may be. Companies try to predict how favorable a customer is to insure by looking at their history.
There are numerous other factors that impact your premium as well such as: your age, driving history, location, vehicle ,etc.; but your insurance score has a significant impact on your premium.
What factors determine my Insurance Score?
There are several factors involved in determining an Insurance Score that are similar to what is used in rating a credit score. FICO has a specific algorithm for calculating an Insurance Score breaking it down into percentages on how it effects you:
- Credit/Payment History: 40%
- Current Level of Debt: 30%
- Length of Credit History: 15%
- New Credit: 10%
- Credit Mix: 5%
How do I improve my score?
- MAKE PAYMENTS ON TIME!
This has the most significant impact on your credit and insurance score. Making sure your premiums are paid on time reduces the risk of having a lapse, cancellation, or the stress of worrying if you had coverage during the time of a loss. - LONG ESTABLISHED CREDIT HISTORY!
It always helps companies to know that you’ve had a long line of good credit. The longer you’ve had loans, cards, or debts that you’ve successfully paid off, the better your score. - DON’T USE ALL AVAILABLE CREDIT!
Just because you can doesn’t mean you should. Live within your means. Keeping your credit use to about 30% or under your total available limit is ideal. This means not maxing out credit cards, taking out the maximum amount approved for on a loan, etc.
Some of these items are out of your control, such as the length of credit history if you are a younger person, but managing your finances at an early age can ensure your premiums to decrease as you grow!
So, what is a good Insurance Score?!
| 770 – 997 | Excellent |
| 626 – 769 | Okay |
| 501 – 625 | Below Average |
| 200 – 500 | Poor |
More Questions?
Give us a call! We would be happy to help answer any questions you may have.
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